Forex Market Commentary
It's all happening in US equities.
Dow Jones climbs this week on a positive note the US will not go into recession thus reversing the dramatic fall to 15,370 at the beginning of this year. The VIX currently stands at a lower volatility mark at 17.75 unlike a high of 29 in January this year with equities options indicating further price growth in the months to come. Energy companies fared well this week in US equities markets as the USD slumped against major currencies for 3 consecutive weeks. Oil prices also have been firming this week above $40 on the belief that the US economy will be strong this year. The Univ. Michigan Consumer Sentiment index fell slightly in March to 90.0 from February 91.7 but that doesn't change any belief that although the US may not match the strong 2.4% GDP growth of the last 2 years, it may certainly expand at a more modest but acceptable rate. Univ. Michigan Inflation Outlook for the next 12 months is at 2.7% and which over-shoots the Fed target of 2% and which supports the idea that though for now the rates may not rise; but they may rise a further 25 basis points towards the end of the year after the US Fed engineered a soft brake on the US economy in Q1 16. Should China successfully manage to stimulate it's economy then the prospects for the US economy are strong for 2016. On the back of this news gold bullion slid to the 1250 region on a pause on it's current upward trajectory.
EUR/ USD - For our purposes of studying the EUR/ USD this year 2016 we shall be keeping an eye out for yield convergence signs. Key resistance is located at 1.1453 and 1.1640 has been holding the EUR/ USD this week with the ECB keeping a keen eye and wary of any further rapid appreciation. Support at 1.0810 remains rock solid for now. Shorts are in play at the 1.14. 1.12 seems tolerable for the ECB at the moment trying to resuscitate a morbid Euro zone export sector. With the cash futures the overall bullish sentiment for the Euro has gradually declines this week to 35% from 37% last week and 38% and 41% in preceding weeks. Longs have reduced from 104, 165 to 90,353 contracts but also shorts have reduced from 176,072 to 167,098. Spec action on the long side is waning as commercial banks keep purchasing more Euro at lower rates. The ECB is likely to step up it's open market operations at any whiff of the 1.14 mark to push the EUR/ USD to a more acceptible 1.10 region so long traders take note of the economic fundamentals of the forward yield curves on EUR/ USD as convergence vs divergence talks skew in favor of divergence once again with strong US data demonstrating at least one more 25 bp increment this year and none for the Euro zone. Specs may not jump but expect price erosion to the 1.10 and possibly 1.08 over the next 2 weeks. Further data on Q1 is required to settle the outlook which tends to favor a neutral stance at the moment.
GBP/ USD - Our purposes of watching this pair would be to identify a trading opportunity on the GBP as the Brexit talks increase volatility. This week's short term bullish momentum picked up and the GBP fared well to appreciate to a high of 1.45. Support for now looks solid at the 1.3503 level. Interestingly, in the futures cash contract, large secs increased their bullish position from 29,364 to a whopping 62,876 contracts since last week and reduced short positions from 78,369 to 76,495 to show an overall increase from 27% to a 45% bullish outlook. But the fast spec move to the long side got a dash of reality also with the UK budget speech highlighting the gloom around the UK economy and the current spec upwards momentum seems doomed to fizzle. it appears that the large spec push up was a little too much too soon. Concerns remain over Brexit and shorts in play possible next week on profit taking over the 1.45 mark with a resumption of the downward trend. The March 2016 budget story was packed with all the essentials that mirrored the ECB's stimulus package last week to kick start the moribund UK economy. With lowered BOE economic forecasts and UK Gilt and LIBOR forward yield curves set to flatten a push above the 1.45 flatters to deceive. More likely the outlook for UK rates is a hold at 0.5% for at least the next 2 quarters with inflation now revised down to 0.7%. Certainly the BOE would remain in favor of lower rates to help the UK housing sector with the new ISA package and UK exports and so 1.45 seems a tad too high at the moment. Add on top of the economic tale of woe the potential for a Euro zone exit and we have a scenario for speculative explosiveness on the short side rather than on the long. We need a strong break above the 1.46 to confirm an upward trend and given the current state of macroeconomic reality in the UK, more likely we are going to see a retracement to the 1.35 level. So watch out for shorts in play for contrarian moves this coming 2 weeks ahead and when the bottom drops its likely to happen fast.
Gold bullion - at the moment is stalling as the outlook on the USD appears neutral. profit taking yesterday saw bullion drop 25 points to settle at 1250 area. In the long term we will be looking ahead to breaches of 1300 and 1390 with strong support at 1243. BULLION LONGS BEWARE. COT data shows an overwhelming long spec position at 247, 659 longs vs 78,147 shorts at overall 76% bullish outlook unchanged last 2 weeks. BEWARE. the potential for a price collapse is stacking up and the position of the longs is untenable. More likely a pause is needed in this market with a price erosion to the 1220 region before any further upward surge to break the 1300. Hourly resistance at 1284 is fast becoming a bridge too far and it only requires one last hurrah botched to surmount the 1280 level before the price can erode with disinterest back to 1220.
Crude Oil WTI - WTI has had another good week rising to 42 Dollars. In the wake of Dollar losses this week commodities have fared rather well as non US companies purchase commodities cheaper. But note must be taken that in the US this year 40 oil companies have sought chapter 11 and the worst is not over. The overall trend is neutral as consolidation above 28 Dollars continues with indicators pointing to a neutral to bullish bias and a sustainable trading range of 30-40 Dollars for the next 6 months. Expect the shorts in play above 44 Dollars until the end of this year. COT data reveals 544,416 spec longs vs 274,560 with an overall bullish bias at 66% increase from 65% last week. hedge funds have been piling into the futures contract racing the price up from $30 to $42 but hold on and hold your horses. Yes, the US economy is holding up well in spite of a hurting export and manufacturing and energy sector. BUT, that does not immediately justify a 20% price move in the last 2 weeks and with a shaky China being the world's biggest customer, prices seemed to have surged in euphoria a little too fast with the realization that the US Fed has carefully engineered a soft brake whilst carrying the entire world of the Euro land and Asian economies. Full credit to the US Fed but watch out for a quick retracement. The 200 day moving average is at $47 but the current buying pressure does not seem to be physical rather than speculative and we could see a fast decline back down to $35 as hedge funds cover their longs and equilibrium comes back to the physical market.
Read on Bloomberg: http://www.bloomberg.com/news/articles/2016-03-18/s-p-500-futures-inch-higher-with-stocks-set-for-5th-weekly-gain
and
http://www.bloomberg.com/news/articles/2016-03-18/r-i-p-dollar-rally-as-dovish-fed-spurs-worst-slump-since-2011
Important data:
FX:
EUR/ USD 1.126355 -0.004660 -0.41%
USD/CHF 0.970350 +0.003020 +0.31%
USD/JPY 111.6755 +0.2485 +0.22%
CNY/ USD 0.153330 + 0.00050 +0.1%
GBP/USD 1.43855 +0.01065 +0.75%
AUD/ USD (commodity currency) 0.75975 -0.00365 -0.48%
USD/CAD (commodity currency) 1.30375 +0.00400 +0.31%
NZD/USD (commodity currency) 0.678750 -0.004085 -0.60%
Fixed Income Markets:
US Federal Reserve - +0.50%
US 30 Day Fed Fund 99.615 0.000 0.00%
US 2 year T-Notes 109.093750 +0.054688 +0.05%
US 10 year T-Notes 129.359375 +0.250000 +0.19%
ECB Base rate 0.040 %
Chinese interest rate PBC China 4.35 %
Japanese interest rate (BoJ) 0.10 %
Equities Markets:
Nikkei 16,724.81 - 211.57 (1.25%)
SSE Composite Index 2,955.15 50.32(1.73%)
Hang Seng 20,671.63 + 167.82 (0.82%)
DAX 9,950.80 +58.60 (0.59%)
FTSE 100 6,189.64 -11.48 (0.19%)
DJIA 17,602.30 + 120.81 (0.69%)
Commodities Futures Cash:
Crude Oil WTI 41.22 -0.44 -1.06%
Gold 1252.85 -5.40 -0.43%
Indicies:
USDX 95.057 +0.282 +0.36%
VIX 17.75 - 0.02 - 0.14%
Pieter Bergli - DeLoren Trust Holdings
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Futures and Options trading involves risks of losses. No representation is being made that any reader and account will or is likely to achieve profits or losses similar to those that are being discussed on this blog http://forexeducationperspective.blogspot.com/. The past performance of any trading system or methodology discussed is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
All trades, patterns, charts, systems, etc., discussed in this blog http://forexeducationperspective.blogspot.com/ are for educative and illustrative purposes only and not to be construed as specific advisory recommendations for actual trades. Disclaimer - http://forexeducationperspective.blogspot.com/ bears no responsibility for the trading actions of its readers.
* European Union laws require European Union visitors to this blog to know that cookies are used by Blogger and Google, including use of Google Analytics and AdSense cookies and in reading material from this blog do consent to the use of such cookies
A non-profit commitment to provide education on the properties of currency markets. Forex market commentaries and media reports for free
Disclaimer - U.S. Government Required Disclaimer - Commodity Futures Trading Commission
Futures and Options trading involves risks of losses. No representation is being made that any reader and account will or is likely to achieve profits or losses similar to those that are being discussed on this blog http://forexeducationperspective.blogspot.com/. The past performance of any trading system or methodology discussed is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
All trades, patterns, charts, systems, etc., discussed in this blog http://forexeducationperspective.blogspot.com/ are for educative and illustrative purposes only and not to be construed as specific advisory recommendations for actual trades. Disclaimer - http://forexeducationperspective.blogspot.com/ bears no responsibility for the trading actions of its readers.
* European Union laws require European Union visitors to this blog to know that cookies are used by Blogger and Google, including use of Google Analytics and AdSense cookies and in reading material from this blog do consent to the use of such cookies
